Mastercard Inc (MA) Is Undervalued

The books are also not attractive for Visa. With a PE ratio of nearly 83, among the highest in the consumer financial services industry, the company is already very expensive. Also, the firm’s profit margin is only 21%, which would be stellar in most sectors, but MasterCard Inc (NYSE:MA) has nearly a 38% profit margin.

American Express is very American

American Express Company (NYSE:AXP) is known by travelers to have the least amount of usability overseas. The firm charges a 3% transaction fee, which is higher than MasterCard Inc (NYSE:MA) and Visa. Furthermore, the company hasn’t integrated with Travelex, which allows those who hold a MasterCard Inc (NYSE:MA) or Visa to load the card online.

Taking a look at the numbers, American Express is likely overpriced. The price-to-book ratio is 4.2, which is above average in the sector. Furthermore, the firm is the highest leveraged in the industry, with a debt-to-capital ratio of nearly 76%, which is in dangerous territory and could spell trouble if profits drop.

When it comes down to it

I choose MasterCard over Visa and American Express for the simple fact of the amount of attention each firm is giving the developing world. MasterCard is leagues ahead in this department. The trillion-dollar industry that is created by the developing nations – and increased travel – will result in large profits for American firms that know how to integrate internationally. But those who are confounded by bounded rationality will stick in the United States, where profit-generating potential is already nearly fully realized.

The article Mastercard Is Undervalued originally appeared on Fool.com.

Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends American Express, MasterCard, and Visa. The Motley Fool owns shares of MasterCard. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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